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Consumer Inquiry Focuses on Bank Overdraft Fees

WASHINGTON — The Consumer Financial Protection Bureau is beginning an inquiry into how banks levy overdraft fees they charge customers who bounce checks or withdraw more than they have in their accounts using debit cards or automated teller machines, the head of the agency said Tuesday.

Richard Cordray, the director of the bureau, said the inquiry would focus on whether some banks misled consumers in 2010 when they put in place new Federal Reserve regulations for overdraft protection. The agency will try to determine whether banks routinely reorder customer transactions to maximize potential overdrafts, and will seek data on the effect of overdraft fees on young and low-income bank customers.

Coming a little more than a year and a half after the Federal Reserve issued a new set of regulations governing overdraft rules for banks that issue A.T.M. and debit cards, the renewed scrutiny is unlikely to please bankers, many of whom are already wary of the regulatory burden they say the consumer bureau is likely to impose on banks.

In a speech on Wednesday to bankers and consumer advocates at the Roosevelt House Public Policy Institute at Hunter College in Manhattan, Mr. Cordray plans to announce that the consumer bureau will request data from banks about practices and from consumers about their experiences with overdraft fees and protection.

“Overdraft practices have the capacity to inflict serious economic harm on the people who can least afford it,” Mr. Cordray will say, according to an excerpt of his prepared remarks made available on Tuesday. “We want to learn how consumers are affected and how well they are able to anticipate and avoid paying late fees.”

Among the topics for additional study is whether banks commingle all of a customer’s daily business and process the largest transactions first, which could maximize the number of transactions that set off an overdraft fee, agency officials said.

The consumer bureau says the inquiry is a fact-finding exercise rather than an investigation of allegations of wrongdoing. But it could lead to new rules being issued by the bureau, which last year took over the regulation of consumer banking. That job previously was spread among several agencies, including the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.

Already, the bureau has devised a model of what it calls a “penalty fee box,” a notification that would appear prominently on checking account statements of customers who have overdrawn their account, detailing what fees were assessed.

In addition to public feedback on the penalty fee box, the agency plans to seek information to back up anecdotal reports it has received of misleading marketing of the Federal Reserve regulations that went into effect in July 2010.

Those regulations required that consumers opt in for banking services that provide overdraft protection for A.T.M. and debit card transactions. The consumer bureau has found that opt-in rates differ significantly among banks, raising questions about how banks presented choices about the new rules to consumers.

Jurisdiction over that regulation transferred to the consumer bureau in October. But the American Bankers Association has already told officials there that different banking regulators have continued to enforce on banks “a diversity of expectations” about overdraft practices, said Richard Riese, senior vice president for regulatory compliance at the bankers association.

When the Federal Reserve’s guidelines were completed in 2010, “our members all had the expectation that they were investing in something that would be settled,” Mr. Riese said. But a month after those regulations took effect, the F.D.I.C. proposed further overdraft rules, he said. The association is preparing a comment letter to the consumer bureau about “the type of burden that comes from a lack of regulatory uniformity,” Mr. Riese added.

A version of this article appears in print on February 22, 2012, on page B7 of the New York edition with the headline: Consumer Inquiry Focuses On Bank Overdraft Fees. Order Reprints|Today's Paper|Subscribe